Background on Section 8 renters.

20 Replies

I just purchased my first rental property and have been considering doing Section 8 rental on this property. The question that I have is about the income requirements that I would like to use. I would like to see 3x the amount of income to rent. So when looking at this would I factor that in on what the occupants share of the rent is or how do some of the seasoned investor with Section 8 handle this aspect of things. A little confused on this aspect.

thanks

Most of sec 8 will have no income. Sec 8 will only allow there renters to pay a fair market rent. I have work with sec 8 for over 20 years and have had no more then a minor problems with them or the renter. I would give them a A rating. 

That's what I would do. Get confirmation of their voucher and if it doesn't cover the entire rent amount, then verify that they have a monthly income of at least 3X the amount of the remaining rent amount not covered by the voucher. If they receive things like food stamps, you could include that is monthly income. 

Nicole A., New Page LLC | [email protected] | 305‑537‑6252

Originally posted by @Sydney Chase:

Most of sec 8 will have no income. Sec 8 will only allow there renters to pay a fair market rent. I have work with sec 8 for over 20 years and have had no more then a minor problems with them or the renter. I would give them a A rating. 

 Their. Sorry

I had a Section 8 tenant as my first tenant....and she knew way more about the program, and being a tenant, than I did. Be very careful and make sure you completely understand the program. A tenant that has to contribute part of their own income towards the rent may decide not to - and then you need to be involved with their caseworker and the "system". That system, and the quality of caseworkers, will vary from town to town and state to state. 

Section 8 is much more than just guaranteed rent every month. Do your research and decide if this is something you really want to take on as a new landlord. There are a lot of threads about this on BP. 

Food stamp is not a monthly income. Most new landlords will let greed take over dealing with section 8 and want to raise the rent and gouge the tenant. Section 8 is guaranteed rent. Section 8 will set the rules not the landlord, but the landlord can refuse to take guaranteed rent.


Joe Gore

If a person is getting say $900/month in SS, that would be considered income. If a person is also receiving food stamps in the amount of say $350/month, why would that also not be considered income? No, it's not cash, but it's looking at in the sense that this "income" comes in to support the household each month. I've always been told to include a person's food assistance as part of the 3X rule. This is not a correct method?

It's not related to raising the rent in order to try to get more money.

Nicole A., New Page LLC | [email protected] | 305‑537‑6252

Make sure you check your state and local laws regarding how you qualify their income compared with the rent.  I know here in CA, if your screening criteria is 3x rent, you can only require a S8 tenant to make 3x their portion of the rent as income.  Say, for example, you're charging $1,000/month rent, and an applicant has a S8 voucher that will pay $700 of that rent, and the tenant will have to pay the remaining $300 a month.  If you require 3x rent, then you could only require them to have income of $900 a month.  So, make sure you know your local/state requirements.

For the record, I have never accepted Section 8, and never will.

If a Section 8 person made 3X the amount of the full rent, they wouldn't be on Section 8 in the first place. So I'm fairly certain you would only apply the rule to the amount of rent they are responsible in pretty much any state. It just makes no sense otherwise.

Nicole A., New Page LLC | [email protected] | 305‑537‑6252

thanks for the information everyone I was leaning towards 3x the amout that the renter had to pay out of pocket also agree with the idea of looking at food stamps as a source of income since it is going toward the total to take care of the household.

The best section 8 tenant is someone who has voucher that covers 100% rent rate. Most caseworker won't let you know how much the voucher is. In MA, section-8 pays 70% and tenant pays 30% (if she/he works at all). You have to tell the caseworker you need to know the voucher value to be able to determine if the tenant can afford the unit - caseworker will eventually gives it if you are persistent. 

You will love the direct deposit once you got all the initial paperwork out of the way. The inspection is pretty good if you are a responsible landlord. 

Ideally, unit to rent to section-8 is a BC. I don't recommend renting it to section-8 if your unit is an A.

Section-8 tenant is afraid of getting evicted (affecting their voucher and caseworker relationship), so they will obey most/all of what you ask. Keep in mind, you are dealing with someone who is not as educated and limited money resource.  

Chan as for the BC and A units can you clarify what that is I think you are talking about the shape that the property is in just wanted to make sure I am on the right page with you. Also as for credit history do you all find that section 8 tenants have reasonable credit or not.

Originally posted by @Nicole W.:

If a person is getting say $900/month in SS, that would be considered income. If a person is also receiving food stamps in the amount of say $350/month, why would that also not be considered income? No, it's not cash, but it's looking at in the sense that this "income" comes in to support the household each month. I've always been told to include a person's food assistance as part of the 3X rule. This is not a correct method?

It's not related to raising the rent in order to try to get more money.

 Nicole, Not sure if it's true in all MD, but in Annapolis, we would have to count all of it as income towards their qualification as we cannot discriminate on source of income.   If they receive it, employment or assistance, we need to count it.  

Also, for general discussion, Section 8 or not, I'd want a good credit history and clean criminal background check and landlord references or no way they are living in my house, even if Section 8 pays 100%.   I do have a Section 8 in Chesapeake, but once this tenant is gone, no more (at least in the places I'm allowed to opt out), as the rules there have become too strict. 

@Chan K. , I had a Section 8 tenant as my very first tenant. She had no fear of losing her voucher, so that may not determine any tenants' behavior. Any savvy Section 8 tenant likely knows the program doesn't want to kick them out, since it's in their best interest to keep them housed and not homeless. That's where the tenants' entitlement attitude comes in - our tenant would demand what she wanted, even if it wasn't required by Section 8. And she got verbally abusive when she was told no. Her only redeeming quality was being a great housekeeper.

Anyway....dealing with Section 8 is not for the faint of heart, or new landlords.

We accept Section 8 and it has been easy to work with the program.  We like Section 8 tenants.  The rent gets paid like clockwork, the tenants stay for a long time, and the units stay in pretty good shape.  That's been our experience of over 19 years.

Screen as you would with any other prospective tenant.  The tenant will either pass or will  not.  

Set your rental rate as you wish and maintain your unit.  The unit will either meet the program criteria or it will not.

About the income criteria.... our minimum criteria to rent is 3x rent, but we will consider 2.5 x rent with additional security deposit.  We count all earned income, passive income, and income equivalents.   We consider housing subsidies and food stamps as income equivalents, as they offset necessary living expenses.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@Chan K.   You said, "Keep in mind, you are dealing with someone who is not as educated and limited money resource."

Your statement is a generalization and not always true.  We have some very well educated Section 8 tenants.  Retired folks, veterans, people with disabilities.  Limited income is the only common factor, not education.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@John DeFoor  The problem I see with using "3 x tenant portion of rent" instead of "3 x rent".... what if the tenant portion is very little or even zero?   Seems to me, the best way would be to count the Section 8 subsidy amount towards the income requirement, but to stick with the same screening criteria for all applicants.  

Another way to frame it....  if working in a state with a rule like that mentioned by @Kimberly T.   .... how about setting the screening criteria with an income requirement of  "Rent plus $1000" or "Rent plus $2000" or whatever amount would give you assurance that the tenant would have sufficient income to meet their living expenses?  Even so, I would still count "income equivalents" in my calculations, such as rent subsidies, utility subsidies, food stamps and other public benefits.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@John DeFoor   As a new landlord dealing with section 8 tenants these are just some things I would lookout for/verify

  • Make sure Section 8 is covering 100% of prospective tenants rent.  
  • Get confirmation on the voucher amount so there is no confusion.
  • If Section does not cover 100% then I would evaluate this tenant like a normal non-subsidized renter
  • Regardless of the paying arrangement perform a background like you normally would.
  • Include on your lease the maximum tenants allowed in the unit (in my state this is done by town) and make them list the names and SSN's for everyone that is applying for the unit.
  • Make sure your unit can withstand the rigors of a section 8 tenant (there are several threads on this topic on BP)

Medium rzt hc 6483Michael Noto, SalCal Real Estate Connections | [email protected] | 860‑384‑7570 | https://www.zillow.com/profile/Mike-Noto/

Here in Dallas Section 8 will put people in the program that does not have an SSN. So if section 8 sends over two people one with an SSN and one without, then you need to accept both or lose out on the section 8 tenants. Section 8 here in Dallas will pay 100% of the rent unless the landlord has to jack the rate because it is a section 8 tenant. Don't try and fool section 8, they know what the rent is in all areas.


Joe Gore

@Marcia Maynard  

I am speaking from experience with either the inherited and new tenants so far. Sorry if this is a strong statement. None of my section-8 is either disability, retired or veteran.

@John DeFoor  

You are correct. I was referring to the condition of the units, building or/and neighborhood. No need to check for criminal background, because caseworker already checked section-8 criminal background as part of the qualification. As per credit check, usually it is not necessary if the caseworker covers more than 70-80%. You can make the case not to accept the tenant based on the 3x income rule if the voucher is less than 70-80%. I would not take any risk.

Aly NA 

I am shock to hear that they don't have SSN. Is not this consider illegal immigrant? You should try to understand and question the caseworker of why the people without SSN received the voucher. This program is for American and its residence. We all pay for it through our taxes deduction. I don't believe people without SSN deserve this kind of privilege.

Keep in mind, you are required to sign up with them for one year lease initially. After you finished with the first year, you can put them on a Tenant at Will. If you later have any problem or don't like them for whatever reason anymore, you can tell them that you are no longer interested in renting to them. You can also raise the rent so high until caseworker tells you the unit is no longer affordable, then she/he will tell section-8 tenant to leave. FYI: I am from MA, we don't have a cap on the rent. Landlord decides what to charge.

@Chan K.,

The government will decide who is illegal and who to issue the voucher to not the taxpayers. The voucher is for anyone who needs housing.


Joe Gore